Latest Studies

This report from Willis Towers Watson PLC predicts property market rate increases in the low single digits for non-catastrophe exposed risks and low double digits for cat-exposed programs in 2018. The report makes pricing predictions of flat to up 5 percent for non-catastrophe exposed property, increases of 10 percent to 20 percent for catastrophe-exposed property, and increases of 20 percent to 25 percent for cat-exposed property with losses. According to the report, January 1 reinsurance renewals came in with average increases between 5 percent and 7 percent. Furthermore, alternative capital was “undaunted,” with plentiful third-party funds blunting rate increases and a sustained rise in rates, and the highly liquid nature of this capital may help deter the formation of new insurance companies. The report also called 2017 the costliest year on record for catastrophe losses, surpassing the 2011 total of $120 billion. Reported carrier losses and modeled results to date point to a cat loss estimate of $143 billion for all of 2017’s events, according to the report. Full report

The latest claims satisfaction survey from J.D. Power found that insurers that have achieved the highest levels of customer satisfaction have also been the most effective at managing customer expectations for the time that it will take to settle claims. “The last two years of record catastrophic losses have put P&C insurers to the test, and many have risen to the occasion, driving overall customer satisfaction levels to new highs,” said David Pieffer, Property & Casualty Insurance Practice Lead at J.D. Power. “While that overall performance is a positive for the industry, there is wide variability in the ranges of performance among insurers in different regions of the country and between different service attributes. Particularly noteworthy, customer satisfaction in Texas and Florida—two of the areas hardest hit by hurricanes—show below-average results, spotlighting areas where there is still room for improvement among insurers.” The time it took to settle a claim is the single lowest-rated attribute in the study, with 1 in 7 respondents indicating that the claim took longer than expected. However, when time frames are properly managed, even groups that experience the longest time-to-settlement still rate their experience above the industry average of 8.45 (on a 10-point scale). Time-to-settle satisfaction ratings are 1.9 points lower when insurers miss customer timing expectations, even when the time frame is relatively short. Amica Mutual, Chubb and Erie ranked at the top of the survey followed by State Farm and Auto Owners Insurance. News Release

This study by the Jacobson Group and the Ward Group examines insurance industry labor trends and hiring expectations for 2018. “Anticipated increases in business volume and expansion into new markets continue to drive hiring demands,” said Gregory P. Jacobson, co-chief executive officer of Jacobson. The study found that 58 percent of insurance companies plan to increase staff during the next 12 months. Technology, actuarial and analytic positions are the most difficult to fill. The top three reasons for increasing staff were cited as: Expansion of business/new markets (51 percent); anticipated increase in business volume (47 percent); and areas currently understaffed (41 percent). Companies that are decreasing staff sited automation improvement (23 percent) as the top reason, followed by reorganization (17 percent) and areas currently overstaffed (8 percent). Companies are also requiring more temporary staff, 12 percent of companies are planning to increase their use, up from 11 percent in January 2017. Study summary

Over the last 40 years, the global property protection gap in natural catastrophe risk has continuously widened. Historically, the extreme events with the most underinsurance are the climate-related risks of floods and windstorms, while the largest share of underinsurance is for earthquakes. This study examines the gap in terms of geography and type of risk and uses empirical data to analyze the most significant causes of the gap. Models that combine geophysical vulnerability maps, economic exposure data and insurance market statistics are used to estimate uninsured expected catastrophe losses. Each nation’s optimal property insurance penetration is modeled and compared with the actual penetration to determine the level of property underinsurance. Finally, the study considers factors that affect the demand for property insurance by applying regression analysis to an unbalanced panel data set of 53 nations observed over a period of 15 years, identifying economic, financial market, socio-demographic, cultural and institutional variables. The study concludes with a taxonomy of the basic causes of underinsurance and proposed measures to reduce the protection gap. The article includes various graphs and tables, including a chart that shows insured losses as a percentage of economic natural catastrophe losses, annual expected natural catastrophe property damages, both insured and uninsured, for quakes, floods and windstorms, and a table that lists the stakeholders, main objectives and potential risk chain effects of eight measures to narrow the protection gap. Full article

Nearly half of homeowners and renters in the United States would consider allowing their insurance company to receive information about the status of their home through a smart home device or system, according to this survey from the Insurance Research Council (IRC). Forty-five percent of respondents said they would consider allowing their insurance company to receive such information, while 31 percent said they “don’t know or were not sure” whether they would allow it, and 25 percent said they would not allow it. Smart home devices are connected directly to home wireless networks and can alert homeowners and renters to the security of their homes or the status of their heating or plumbing systems. They can also enable homeowners to remotely control or activate a mechanism or device in the home, such as a door lock or a thermostat. Many insurers are actively experimenting with smart home devices and applications to enable homeowners and renters to manage risks better in the home and to provide additional services to customers. Some smart home devices and systems involve allow an insurance company to receive limited information about the status of a policyholder’s home directly through the device or system. Privacy is a concern for homeowners, the forty-eight percent who said that they would not consider allowing their insurer to receive information through a smart home device cited a desire to protect their privacy as the primary reason. Twenty-two percent said they would not allow it because they would not be able to control how the information collected was being used. Fifty-five percent of homeowners who said they rejected their insurers’ offer to install a home monitoring device cited cost as the reason. For more information on the study’s methodology and findings, contact David Corum at 484-831-9046 or at IRC@TheInstitutes.org. Visit the IRC’s website, www.insurance-research.org, for information about purchasing a copy of the report.

This study commissioned by specialist insurer Hiscox shows major shortcomings in cybersecurity readiness of 73 percent of more than 4,100 organizations in five countries, despite acute awareness of the problem. The study surveyed a representative sample of organizations in both the private and public sectors in the U.K., the U.S., Germany, Spain and the Netherlands and found that 45 percent of the respondents had been hit by at least one cyberattack within the last year and two-thirds had experienced two or more attacks. The cost of cybercrime to some respondents was as high as $25 million, while the average cost of all incidents was $229,000. Financial services, energy, telecoms and government organizations were the leading targets for hackers, while financial services firms spent the most on cybersecurity, followed by pharmaceuticals, the healthcare sector and government organizations. Full report

This report from A.M. Best indicates that the underwriting profitability of the personal auto line of business improved in 2017 as rate increases effectively offset trends in loss frequency and severity. According to the report, the combined ratio for the U.S. private passenger standard auto composite, or companies with private passenger auto net premiums written that represent at least 50 percent of their total net premiums written, was 101.6 during the fourth quarter of 2017, 4.3 points higher than the same quarter in 2016. The combined ratio of the industry’s total private passenger auto has deteriorated each year since 2013 and fell to 105.9 in 2016, after the loss and loss adjustment expense ratio increased by 2.6 points. Over a long period, increases in frequency and severity have eroded private passenger auto liability reserves. Beginning in 2012, the development of reserves became less favorable and began developing adversely by 2015, which A.M. Best attributes to late development in multiple prior accident years. Full report

This report on auto collision frequency trends found that an increase in congestion, as measured by drivers per lane mile and commute times positively correlates to collision frequency; Mobile broadband access (used as a proxy for the likelihood that a driver may have a mobile device while driving) appears to have no impact on collision frequency; and that the legal system (no-fault vs. tort) does not appear to impact the expected collision frequency, but has a big impact on the variance of the frequency. The group’s goal is to provide an analytical basis for discussing and understanding the auto insurance loss cost drivers that ultimately affect premiums. Subsequent reports are expected to be released. Full report

This survey by Esurance found that the majority (58 percent) of drivers admitted to occasional or frequent distracted driving. The studies' authors were surprised to find that the drivers who admit to driving distracted are 36 percent less likely to be “very concerned“ about the issue than those who claim to be ”rarely distracted.” Phone use still tops the list of driver distractions. Of the drivers who said that they were “rarely distracted,” 59 percent admitted to talking on the phone while driving. Almost all surveyed drivers (91 percent) believe that texting while driving is distracting, but more than half (53 percent) of daily commuters admit to doing it anyway. Drivers who reported long commutes are 2.5 times more likely to be distracted by their phones, GPS, or music. In general, the more time spent in cars, the greater the chance that the driver will give in to the temptation of some type of distraction, usually tech-related. A section on semi-autonomous features reports that almost half (46 percent) of high-tech car owners said that the features enhance their on-road behavior, with 29 percent reporting that the warning sounds of the features can be distracting. Full report

This study by AAA Foundation for Traffic Safety identified drowsiness in 8.8 percent to 9.5 percent of all crashes and 10.6 percent to 10.8 percent of crashes that resulted in significant property damage. The study assessed drowsiness using the PERCLOS measure, which is the percentage of time that a person’s eyes are closed over a defined interval. Nearly 55 percent of crashes, in which PERCLOS was coded, involved drivers under the age of 25, a correlation to their overall elevated crash rates. Additionally, lighting conditions had a significant effect, with drowsiness evident in more than three times the proportion of crashes in darkness as in daylight. Only 31 percent of crashes examined were classified as severe or moderately severe, i.e., were reported to police or met the police-reporting threshold. The remaining 69 percent were of lower-severity and generally not police-reportable. This disparity can explain the stark contrast to official government statistics on drowsy driving accidents. Previous research by the AAA Foundation for Traffic Safety found that driving after having slept less than seven hours in a 24-hour period is associated with significantly higher crash rates. Full report

This study from the RAND Corporation published in the March 2018 issue of The Journal of Health Economics concludes that the correlation between medical marijuana and fewer deaths from opioid overdoses shown in several previous studies is more complicated than researchers realized previously. The latest report indicates that the legalization of medical marijuana could be correlated with fewer opioid fatalities, but only in states that authorized dispensaries and made medical marijuana readily available to patients. In states that only provided legal protections to patients and caregivers who grew their own marijuana, the rates of opioid fatalities did not decline. Furthermore, the correlation between medical marijuana dispensaries and lower rates of opioid deaths declined precipitously after 2010, when states began placing tight restrictions on sales by dispensaries. News release

This report describes data breach trends based on incidents that Beazley, a leading insurer of cyberrisk, helped clients manage in 2017. According to the report, there was an 18 percent increase in ransomware incidents across all industries. The healthcare industry accounted for 45 percent of all ransomware incidents. Fraudulent wire instructions also increased in 2017. The report identifies a variation of phishing in which criminals change direct deposit information in employee self-service portals and redirect paychecks. If the criminals can also access W-2 information through the payroll processor's user account, they may also file a fraudulent tax return for the employee or use the Social Security number to open lines of credit. And as in prior years, the 2017 tax season brought many W-2 phishing scams which involved a threat actor impersonating a high-level person at an organization to trick a finance department employee into sending them copies of the organization’s W-2 forms which are then used to file fraudulent tax returns. A spotlight section on the healthcare industry notes an increase in average post-breach resolution agreements and penalties enforced against the healthcare industry by the Department of Health and Human Services Office of Civil Rights. The report concludes that in 2018, cyber events that lead to business interruption are expected to increase, and that compliance with international laws will pose a challenge to U.S. companies. Full report

This news release from the NICB reports that vehicle theft increased by more than 4 percent in 2017, according to preliminary FBI data. Many of the stolen vehicles that get recovered are missing wheels, rims or other key parts, while ones that are never recovered end up in chop shops where they are dismantled and sold piece-by-piece. The NICB looked at the cost of replacement parts for the top 10 stolen 2016 models. Parts such as bumpers, doors, fenders, hoods and headlights were on the list. Major components like the engine and transmission were not included. The news release breaks down the cost of individual parts on three of the most stolen 2016 models: the Toyota Camry; the Nissan Altima; and the GMC Sierra pickup truck. Said NICB Senior Vice President and COO Jim Schweitzer, “On today’s cars and trucks, the parts are often worth more than the intact vehicle and may be easier to move and sell. That’s why we see so many thefts of key items like wheels and tires and tailgates ... there’s always a market for them." News Release

Damaging earthquakes in Oklahoma regularly impact the lives of residents, leading to litigation against well operators and posing an increased risk to critical infrastructure. Oklahoma has been a hotbed of human-induced earthquakes since 2009. The cause of the quakes has identified as the injection of wastewater (the byproduct of hydraulic fracturing) into the earth. This study by scientists from the University of Bristol in the United Kingdom found that the depth of the wastewater injection, not just the amount, are key to understanding the quakes. The study shows how raising injection well depths to above the basement rocks in key areas could significantly reduce the annual energy released by earthquakes—thereby reducing the relative likelihoods of larger, damaging earthquakes. The report is summarized in a Science News Daily article.

According to this annual report by the Transported Asset Protection Association (TAPA), there were 649 recorded cargo theft incidents in the United States in 2017, a decrease of 15 percent from the 2016 and 2015 totals. The average loss value per incident was $146,063 in 2017, slightly lower than the $146,042 average loss value in 2016. California, Texas, and New Jersey accounted for: 28 percent, 16 percent and 11 percent of total recorded cargo thefts in 2017, respectively, followed by Florida and Georgia each at 9 percent. These states topped the list due to factors such as the presence of large seaports and well-organized cargo theft rings. In 2017 the highest theft rate months were November, October and July, at 13 percent, 11 percent, and 10 percent, respectively. Additionally, weekend days remain the most popular days among thieves, accounting for more than 50 percent of cargo theft activity. Thieves are shifting focus to shipments that are typically a mix of products destined for a physical retail store, and that provide a lesser chance of capture or disruption. Often the loss to a single owner on these loads may be too insignificant to trigger a police report or insurance claim. This trend is evident with the rise of pilferage events, which accounted for 15 percent of thefts in 2017; a 40 percent increase from 2016, and 107 percent increase since 2013. Overall, the United States is ranked as high threat level for cargo theft. Full report

This report is the result of an audit by the Office of the Inspector General of the Federal Emergency Management Agency's (FEMA) Sandy Claims Review Process (SCRP). The audit's objective was to determine whether FEMA properly conducted its review of claims submitted through the superstorm Sandy Claims Review Process (SCRP). The SCRP was set up in response to negative publicity and pressure from members of Congress. In setting up the SCRP FEMA did not rely on certain legislatively mandated internal controls designed to ensure appropriate payments for flood victims. Additionally, during the formation and operation of the SCRP, FEMA failed to establish contractor expectations or provide consistent guidance and oversight related to Sandy claims. These omissions resulted in policyholders receiving unsupported additional payments, excessive costs to operate the SCRP, and time delays processing the claims. FEMA received 19,464 eligible requests for re-review through the SCRP process. As of December 1, 2017, the SCRP review has cost over $196 million to perform and has offered policyholders an additional $270 million for their claims. The report makes seven key recommendations to help reduce cost overruns and increase efficiency, including establishing new procedures and reassessing existing policies. FEMA concurred with all seven of the report’s recommendations and has already begun implementing corrective actions. Full Report